Currency diary
The currency is under pressure. After crossing 164, the PKR/USD closed at 163.89 yesterday. This is the lowest level...
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The other point to contemplate whether flexible exchange rate is the right policy in case of rising commodity prices. Well, the currency depreciation is a double whammy, as the pressure on domestic prices would come from both dollar and rupee increase in prices. That is too much to handle and must be delt with a combination of factors.
One is to let the currency to adjust a bit to curb demand. The other is to raise interest rates a bit to curb demand. Third is to do away with expansionary fiscal (or political) stance. For example, petrol sales are all time high – some of this is to higher tourism and general demand and the other factor is due to not passing on the impact of higher prices to consumers. Government must increase prices as currency depreciation has larger inflationary consequences.
He has confirmed me DM that Inflation will be 15.6% in Mid September.